Kraft is one of the world’s largest consumer products companies, with a diversified line of brands including Oreo, Nabisco and Oscar Mayer. Palm oil, soya, beef, sugar and paper are used in a variety of Kraft products. Globally, demand for these commodities is fueling deforestation. Several of these commodities have been linked to human rights violations, including child and forced labor.

Forests are rapidly declining at a rate of 55 football fields per minute according to the United Nations. Only about 20% of the world’s original forests remain undisturbed.

As a member of the Consumer Goods Forum, Kraft recognizes that “Deforestation is one of the principal drivers of climate change, accounting for 17% of greenhouse gases today. The consumer goods industry, through its growing use of soya, palm oil, beef, paper and board, creates many of the economic incentives which drive deforestation.” (Consumer Goods Forum press release, 11/29/10)

The Intergovernmental Panel on Climate Change, the leading international network of climate scientists, has concluded that global warming is “unequivocal.” The U.S. Environmental Protection Agency has determined that greenhouse gases threaten Americans’ health and welfare.

Climate change impacts from deforestation and poor forest management can be reduced through increased use of recycled materials, independent third party certification schemes, and monitoring of supply chains.

Forest Footprint Disclosure (FFD), an initiative backed by more than 60 financial institutions with over $6 trillion in assets under management, calls on global corporations to report on how their activities and supply chains contribute to deforestation and how those impacts are being managed. Although Kraft has received two annual requests from FFD seeking disclosure of the company’s management of deforestation risks in its supply chain, to date it has declined to respond.

Kraft’s current sustainability report provides some indicators of how the company is managing deforestation risks, through purchases of certified Palm Oil and reductions in packaging, for example. Proponent commends Kraft for these efforts. However, Kraft does not address the impact on forests of its soya, beef and sugar purchases. Several important indicators of how Kraft is managing deforestation risks are lacking. These include:

• A company-wide policy on deforestation

• The percentage of purchases of Palm Oil, beef, soya, sugar and paper that are sustainably sourced, with clear goals for each commodity

• Results of audits to ensure that suppliers are in compliance with Kraft’s forestry goals

• Identifying certification systems and programs that the company will use to ensure sustainable sourcing of each of these commodities.

Proponent believes that Kraft faces potential reputational and operational risks by failing to adequately disclose its approach to managing deforestation risks. For example, Cadbury, now a Kraft brand, faced public controversy over use of Palm Oil in its Diary Milk bars in New Zealand.

RESOLVED: Shareholders request the Board to prepare a report, at reasonable cost and omitting proprietary information, by December 1, 2012, describing how Kraft is assessing the company’s supply chain impact on deforestation and the company’s plans to mitigate these risks.